Dunzo holds talks with debt investors to alter credit terms

Dunzo holds discussion with debt investors to alter credit terms

Dunzo, the stressed quick commerce startup, has discussed using some of the cash lying in the bank to clear pending vendors' dues and staff salary arrears dating back two months as part of its debt-restructuring talks.

The company was in talks with its debt investors about restructuring the terms of its credit, the Economic Times reported sources as saying. People familiar with the matter said negotiations are underway to finalise new terms, including payback timelines, the report added.

Moneycontrol could not independently verify this news development.

Dunzo is also simultaneously seeking new capital from existing and new investors, ET had reported earlier.

"There is cash in the company, but debt obligations with cash flow are relatively stringent compared with equity investors. Dunzo had to take more debt as the April funding round took longer than expected, and it needed capital to run operations," one of the sources mentioned above said, quoting the report. It said, "This is similar to the PharmEasy situation where certain debt covenants, once breached, can restrict a firm's ability to access its available cash."

In November, Dunzo made regulatory filings about closing financing of around $6 million debt from Blacksoil. Sources, however, said the company had raised more debt since then.

"The information on the debt restructuring is inaccurate, and we cannot respond to rumours without specifics. Our business operates with a healthy mix of debt and equity based on the best efficiencies," a spokesperson for Dunzo said, as quoted in ET. The statement said its business has turned 'contribution margin positive' without giving any specifics and that it is seeing 'interest' from investors in 'different forms of capital'.

Also Read | Dunzo slapped with legal notices from seven companies over pending dues

Direct-to-consumer ops

Dunzo Daily has seen its volume of direct-to-consumer transactions fall to almost one-fifth of what it was in June of last year, ET has reported.

In Bengaluru, its home base, the firm operates just seven dark stores now, down from about 150 across the country until at least the middle of last year. Most of Dunzo's operations are now conducted through partner stores.

Also Read | Dunzo promises to pay 12% yearly interest on held-back salaries

There is also a change in the scale of its services. In central Bengaluru, for instance, a number of high population density areas don't have the option of an "instant delivery" that takes between 20 and 35 minutes, meaning users opt for the "no rush" option that can take between 75 and 90 minutes, as per a report by ET.

Earlier, opting for the "no rush" option would earn users a discount of Rs 5 on their orders, whereas "no rush" orders are now charged delivery fees of between Rs 20 and Rs 30 when the order value of the items is less than Rs 349. These charges and timelines vary depending on the pin code.

As part of its plan to internally reduce costs by 30-40 percent, Dunzo laid off up to 200 employees on July 21, having previously deferred employee salary payments from June and July until September 4, according to the report.